Definition of "residence" for IRS purposes

[Judge Roy Bean]

Without delving into tax matters I'm unfamiliar with and missing some un-cross-referenced statute or ruling, how does the IRS determine the state of residence for people who live in multiple states and/or are literally living on the road?

[wserra]

See 26 CFR § 1.121-1(b). Beyond that, I have no idea.

[BBFlatt]

I'm not sure if this is pertains to the situation you are asking about, but there are a number of cases that basically say that for purposes of deducting travelling expenses while away from home, a taxpayer who has no fixed place of residence and is constantly on the move has no tax home, and thus may not deduct meals and lodging.

N. Lewis, 13 TCM 1167, Dec. 20,728(M), TC Memo. 1954-233.

T.V. Osburn, 17 TCM 310, Dec. 22,933(M), TC Memo. 1958-63.

W.J. Fisher, CA-7, 56-1 USTC P 9258, 230 F2d 230.

G.H. James, CA-9, 62-2 USTC P 9735, 308 F2d 204.

H.C. Deneke, 42 TC 981, Dec. 26,942.

J. Rauchwerger, 37 TCM 758, Dec. 35,147(M), TC Memo. 1978-177.

[Kestrel]

Most of what you're asking is answered in IRS Publication 17.

When the person constantly on the move is an interstate truck driver, aircrew member, or railroad worker, there are special rules.

[Arthur Rubin]

Without delving into tax matters I'm unfamiliar with and missing some un-cross-referenced statute or ruling, how does the IRS determine the state of residence for people who live in multiple states and/or are literally living on the road?

The IRS doesn't care about the state of residence. In context, I think you are asking about "tax home", which the other posters have described fairly well.

[Judge Roy Bean]

See 26 CFR § 1.121-1(b). Beyond that, I have no idea.

Thanks, wes - from that the definition is:

... relevant factors in determining a taxpayer's principal residence, include, but are not limited to—
(i) The taxpayer's place of employment;
(ii) The principal place of abode of the taxpayer's family members;
(iii) The address listed on the taxpayer's federal and state tax returns, driver's license, automobile registration, and voter registration card;
(iv) The taxpayer's mailing address for bills and correspondence;
(v) The location of the taxpayer's banks; and
(vi) The location of religious organizations and recreational clubs with which the taxpayer is affiliated.

In this situation,
(i) Retired for a number of years
(ii) Scattered in several states
(iii) They're trying to decide;
(iv) & (v) Multiple
(vi) The only affiliation is with a religion that has widespread membership & locations.

The issues don't involve travel expenses, simply trying to decide if one primary residence is the best idea or can they take advantage of residence determinations for tax and insurance purposes.

Thanks again.

[notorial dissent]

FWIW, he/they can do what a lot of retirees did back when I was working the financial industry, and claim FL, or TX now as well I believe, since they have no income tax and the estate taxes are/were supposedly mild. Unless things have changed dramatically, one thing they will have to execute at some point is an affidavit of domicillary(I think that's how its spelled), we used to have pads of them we sent out for customers. The main reason at the time was income and estate taxes, since the Fed taxes will hit you regardless. It is much better to have something like that done before you get into the estate situation or all the jurisdictions can come at you.

[LaVidaRoja]

Individual States may also have programs to determine where a person is domiciled. AFAIK, California actually counts days of presence when a highly-compensated individual is claiming residence in (no State income tax) Nevada. I have heard that California has a $200,000 TAX minimum for challenging domicile. Look at the requirements of the potentially conflicting states.

[Number Six]

There are lots of people avoiding (evading?) taxes through the on the road gambit. A family I knew had family in Vermont, mooched off them, used FMCA for mail forwarding purposes, had Tennessee plates on their bus, no insurance, lived out of flea markets and later sweet talked a wealthy Southern gentleman into mooching off him by "caretaking" (trashing/hoarding) up a "campground" he owned. And that seems to be the pattern with a certain number of the scofflaws..... Mooch/con/rip-off and then move on to new suckers. Tough for the tax authorities to keep track of them, let alone fine/levy/lien sly travelers.

[Arthur Rubin]

On a more serious note in regard state "residency" or "domiciliary", due to different rules, it's possible for someone to be a resident of no states, or of two or more states. (see WP:BEANS as a reason why I don't go into details about "no" states, although it's clear you have be domiciled somewhere.)

As a subtle example, a trust managed in California, but with only Indiana trustees and beneficiaries, is not subject to state tax, even though both California and Indiana have state income tax which applies to trusts.

[Judge Roy Bean]

I think my head is about to explode.

How does one become a resident of no states? Move to DC?

[Arthur Rubin]

How does one become a resident of no states? Move to DC?

The concepts of "residence" and "domicile" are complicated legal concepts. A quick summary is that a domicile is the place where you live, and intend to return, but once a domicile is established, it doesn't become disestablished until you establish another one.

(As an aside, suppose you are born to transient parents. Is your domicile their domicile, even though you never lived there?)

A "residence" is the place where you live. However, if you are a transient, it may not provide residency for tax purposes

Most states specify that if you are domiciled there, or if you are resident there for a majority of the tax year (with some exceptions for temporary residences with a specific return date), then you are a resident for tax purposes. I don't know of an exception for the "domicile"*; but, if there is one, or if my "aside" leads to more anomalies, then you might not be resident anywhere for tax purposes.

Actually, I do recall an exception for "domicile". California provides that if you are absent from the state for 546 days on a (single) employment-related contract, then you are not a resident for tax purposes, unless you have at more than $200,000 in "intangible income" in a tax year, or your purpose is tax avoidance. The conclusion is obvious, but any employment-related income is also taxed where you earned it, regardless of residence.

... on the road again ...

[Number Six]

They even got Thoreau for tax evasion though he was basically a transient....